Dodd Swaps Bill May Give Trading Edge to CME, ICE (BusinessWeek)

Since the OTC derivative reform debate began, Washington and Wall Street have argued about whether it makes sense to move certain OTC derivative products onto exchange platforms for execution. The Dodd bill seems to think this is the way to go, whereas the House Bill has a better grasp on the idea of non-exchange electronic execution platforms. My comments in the article:

The Senate bill, introduced by Banking Committee Chairman Christopher Dodd, would require the most-active swaps to be traded on systems that show prices beforehand and can sell or transfer open positions if a party to the transaction defaults. That would create de facto exchange trading for standardized swaps, said Kevin McPartland, a senior analyst with Tabb Group.

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Tabb Group’s McPartland said that language was tantamount to an ASEF being defined as an exchange. “It’s completely a clearing function,” he said. “It doesn’t fit within the definition of an execution facility.”